U.S. soybean prices fell 2.6 percent to a 14-month low, wheat skidded to a five-month low and corn dropped more than 1 percent on Friday following a government forecast topped expectations for supplies of the key U.S. grains.    
"There's nothing here that is bullish," said Roy Huckabay, analyst with The Linn Group in Chicago.    

Both U.S. soy and wheat exports will slow in the face of record-setting grain crops around the world and an upturn in the global soybean harvest, the U.S. government said in its December supply and demand report. USDA forecast the supply of U.S. soybean ending stocks to rise to 230 million bushels, above trade estimates for 214 million bushels and above the November forecast for 195 million bushels.
The stocks increase came from reductions in USDA's  forecasts of U.S. 2011/12 soybean exports and the domestic soybean crush. The USDA also raised the 2011/12 global soybean carryout to 64.54 million tonnes, from 63.56 million in November.
USDA pegged 2011/12 U.S. wheat ending stocks at 878 million bushels, above trade estimates for 830 million bushels and up from the November forecast of 828 million bushels. And the USDA raised its forecast 2011/12 corn stocks to 848 million bushels, above trade estimates for 831 million bushels and above the November forecast for 843 million bushels. Traders had expected USDA to cut corn supply estimates slightly due to rising feed use and a lackluster harvest. Corn prices have already fallen by more than 15 percent over the last three months.   

Tim Emslie, an analyst at Country Hedging, said wheat prices were hammered as the report underscored that weaker wheat exports are tied to stiffer competition seen from Australia and Argentina.    

"When their production goes up you have to reduce U.S. numbers. Nothing positive there," he said.    
The spot CBOT wheat contract hit its lowest level since July 1 in early moves, sliding to $5.68-1/4 and closed down 3-1/4 cents at $5.73-1/2. The benchmark CBOT March wheat futures  contract ended down 1 cent at $5.96 a bushel.

CBOT March corn closed down 6 cents at $5.94-1/4 a bushel.     

CBOT January soybeans ended down 25-1/2 cents, or 2.3 percent, at $11.07 a bushel after bottoming out at $11.00-1/4, the lowest level since Oct. 8, 2010, earlier in the session.     
The market also continued to be pressured by doubts about whether a summit of European Union leaders would produce a significant breakthrough to solve a two-year-old debt crisis that could limit demand for agricultural commodities.    

Europe divided in a historic rift on Friday over building a closer fiscal union to preserve the euro, with a large majority of countries led by Germany and France agreeing to forge ahead with a separate treaty, leaving Britain isolated.                  

(Reporting by Carey Gillam; Editing by Alden Bentley)